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How the US Government Affects the Global Economy

It’s not something that people think about much, given that they tend to live in their own little bubbles, but the US government is important to the rest of the world. The actions of the US government can have a huge impact on the global economy. Take, for example, the movements of the US government when it comes to commodity prices.

The price of gold fluctuates depending on the health of major indices and major currencies, since it is a common and popular safe haven. In addition, the price of the dollar is, naturally, affected by US government policy – if investors and industry around the world has faith in fiscal policy in the USA, then the dollar will strengthen. A strong dollar helps support strong US indices, and it also helps to support strong indices in the rest of the world – the UK in particular, because a weak pound/strong dollar pairing helps support the income of companies that get a lot of their income internationally.

A recession in the USA would prompt a domino effect, dragging down a lot of the European markets as well. Emerging countries would stand to do well from a weak USA, but their wealth would likely not be exported.

That’s why so many people outside of the USA care so much about the actions of the US government. There may not be a ‘global single market’ yet. Economic contagions may be more important for Europe collectively than for the USA, but the US Economy is something that matters for the whole world, and when the Electoral College makes its final decision in a matter of weeks, we will see some big changes all over the world as people digest the reality of a change in the presidency.

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